James Kandasamy of Austin, Texas owns and controls approximately 4,000 multi-family real estate assets. James Kandasamy authored Passive Investing in Commercial Real Estate, on his many years of experience in acquisitions, ground-up development, rehab, and asset management.
In the following article, James Kandasamy discusses how investing in multi-family units can be a hedge against inflation in such a violate real estate market.
Even the savviest investors get hit hard during periods of inflation. Sure things rapidly become missteps. Financial advisers start playing a guessing game. People lose money with no end in sight.
Even in the real estate market, James Kandasamy of Austin, Texas says that what has been red-hot for sellers and investors for several years, became a bit uncertain during recent rising inflation.
So far there has been one big investment exception during inflation: multi-family real estate.
And while financial advisers frequently describe general real estate investment as a reliable hedge against inflation, James Kandasamy of Austin, Texas says it’s multi-family real estate that may be the real financial savior.
What is Considered Multi-Family Real Estate
Real estate has a history of turning investment novices into investing moguls. Fortunes have been built on residential and commercial real estate development. Others have been equally successful by slowly acquiring rental properties and reaping reliable rewards.
James Kandasamy of Austin, Texas says that within real estate, multi-family properties most commonly referred to as rental properties, are typically either apartment complexes or buildings that have several different spaces for rent. Multi-family housing can also include townhouses, duplexes, and semi-detached homes.
It is generally considered one of the largest classes of commercial and residential assets. Many decide to invest in multi-family properties as a reliable way to earn passive income — typically such rentals are maintained by others and investors don’t have to worry about day-to-day operations.
James Kandasamy of Austin, Texas says that others appreciate that such investments may be used for certain tax deductions and can be a good way to diversify any investment portfolio.
Hedging Financial Bets
On the surface, multi-family real estate doesn’t seem to be a slam-dunk as a way to protect one’s money during periods of inflation. Single-family real estate, for example, often has comparatively lower costs upfront, while multi-family properties often come with high initial investment prices.
There also tends to be more investors going into a multi-family property together and splitting the income compared to single-family real estate investing explains James Kandasamy of Austin, Texas.
But most financial advisers agree that between the two it’s multi-family real estate investing that has the most potential to hedge against inflation — even when inflation is at a 40-year high.
James Kandasamy of Austin, Texas explains why below:
Rental Rates Continue to Rise
While real estate prices in the United States have cooled recently, where homes are tending to stay on the market longer, that’s not the case for rentals nationwide.
Year after year rental prices continue to climb in America, even though lately there has been a slight downturn in the median monthly rent looking at recent month-to-month figures. In September, the median monthly rent in the U.S. was $2,000, a drop of 2.5% compared to the month before.
But year-over-year, James Kandasamy of Austin, Texas reports that the median monthly rent is still up nearly 9%, evidence of not just stability but financial growth — even after a year of high inflation.
Job Growth is Helping
Despite inflation and rising interest rates in the housing market overall, job growth in the U.S. continues to make investing in multi-family properties attractive. More people are renting, and with rising wages, more people are willing to spend more on rent and avoid buying property tied to escalating interest rates.
A Steady Return
While it’s difficult to predict the exact payoff of other investments during inflation, multifamily properties offer investors a cash flow as steady and predictable as periods of inflation allow. Investors know exactly what they’ll be earning in rent month-to-month and that doesn’t change unless rent is raised.
Multi-Family Also Means Multi-Tax Deductions
If reliable passive income wasn’t enticing enough, many tax deductions are tied to multi-family investing.
James Kandasamy of Austin, Texas says that investors can make deductions related to maintenance (any type of fees related to utilities and repairs), insurance (many can write off whole policy amounts), management (if property managers are hired, any payments or salaries can be deducted), and marketing (deductions are perfectly OK for any fees related to real estate marketing).
Financing Tends to Be a Breeze
Since loan officers are usually very familiar with multi-family real estate investment, units are often easier to finance, according to James Kandasamy of Austin, Texas.
Banks are likely to approve financing as well since multifamily units more often than not generate big returns. In addition, multi-family unit investors often score lower than average interest rates and can usually take advantage of buying several properties under just one loan.
